Market Recap: New Home Sales Surge, Pending Home Sales Unchanged, and GDP Grows
Mortgage rates are trending upward again this week. New home sales hit record highs, climbing to the highest level in a decade. Pending home sales were unchanged from August to September. Third quarter gross domestic product (GDP) exceeded expectations and grew at an annual pace of 3%.
New home sales surged in September, up 18.9% to an annualized rate of 667,000. This is the largest month-over-month percentage gain in almost 28 years, and the highest level of new home sales in a decade. The South contributed heavily to this growth, with hurricane damage leading to a 26% increase in new home sales. The Northeast came in even stronger than the South, up 33%, followed by the Midwest, up 11%, and the West, up 2.9%.
Pending home sales track the number of homes under contract but not yet closed. Typically, it takes four to six weeks for a contract to close. Pending home sales are used to predict future housing market activity. In September, the pending home sales index was 106, unchanged from August’s revised reading. As home prices continue to rise, many would-be home buyers are delaying home purchase.
For the first third quarter estimate, GDP grew at an annual pace of 3%, exceeding the 2.7% expectation, and just slightly below second quarter’s 3.1% rate. Growth was expected to slow due to damage from back-to-back hurricanes. However, continued strong consumer spending and solid business investment drove growth.
Next week, the Federal Open Market Committee meets on Tuesday and Wednesday for the second to last policy meeting of the year. The Fed is not expected to raise rates following this meeting, but analysts are predicting one more rate hike before the end of the year.
Sources: Bloomberg, CNBC, MarketWatch, Mortgage News Daily, US News and World Report